Professional practices - Case Studies

LLP conversion / reporting accountants & tax advisers

Our client is an independent business law firm based in London, with a pre-eminent position for partnership work. It has advised numerous professional firms on the implications of converting to an LLP structure.  The senior partner talks about the firm's longstanding relationship with Smith & Williamson and the work Smith & Williamson has done for them. 

‘As lawyers who specialise in the professional practices sector, we have known Smith & Williamson for a long time and built up a good relationship with them. When we decided to convert to an LLP we didn't think twice about approaching them to assist us through the process, safe in the knowledge that they would do a good job and had the right expertise, having recommended them to some of our clients. 

Our objective was a quick and efficient LLP conversion, which was successfully achieved to an agreed timetable.  They demonstrated a wide knowledge of the tax and accounting issues as well as practical advice, drawing on their considerable experience of other LLP conversions. 

Pleased with the advice and help received through the conversion process, we asked Smith & Williamson to be our reporting accountants and tax advisers.  They have since completed the accounts and SAR work, as well as completing the necessary tax returns earlier than our previous advisers. 

For us, Smith & Williamson is the leading tax adviser in the field of LLP's and a natural choice for any professional practice considering conversion to an LLP'.

Transfer pricing project / merger – international law firm

This international law firm has been a client of ours for a number of years.  A conflict of interest required them to change advisers and they were referred to us through a big four firm.  Following a formal tender process, we were appointed to provide tax and audit services but since then have carried out a number of one off specialist projects.

Being proactive in our approach allows us to have a competitive edge in our market place and create lasting relationships with our clients.  When the new transfer pricing rules came in, following the anti-discrimination legislation, we identified an opportunity for our client which we immediately brought to their attention. 

Drawing upon other skills in our tax team, we consulted our transfer pricing specialists and enabled a large chunk of income to be taxed at a lower rate of 30% instead of 40%.  National Insurance was also reduced by 1% resulting in tax and NI savings of around £150,000 for the client in year 1.  The interesting thing is we converted the partners' liability into corporate liability but got the partners to pay the corporate tax liability at a lower rate. 

We have also helped them through a merger with another law firm and assisted them through an interim period where they had no Finance Director.  It has been invaluable being able to draw upon the expertise of various members of the team including Pamela Sayers and Rajesh Sharma.  We have successfully met their original objective of minimising tax liabilities and continue to ensure we get the best result for our client.

International tax – transfer pricing arrangements

HMRC instigated a formal enquiry into the transfer pricing arrangements and adjustments in the tax computations for a well known firm of surveyors. Smith & Williamson had devised the transfer pricing policy to take advantage of the legislation, dealt with the implementation of the policy and prepared the relevant documentation. Following the instigation of the enquiry, Smith & Williamson assisted the client dealing with all correspondence, providing explanations to HMRC and attending meetings.

Rajesh Sharma, his manager and the finance partner met the two inspectors dealing with the case towards the end of June 2007 and the matter has since been resolved very advantageously.

International structures

We were recently asked by a firm to advise them on suitable structures for their expansion into France and Germany. 

The firm had already initiated the process based on the advice from its previous tax advisers by setting up a partnership in France. However, owing to the local restrictions on practising certificates for non residents, such a structure would not be suitable for a professional services firm dominated by the UK partnership. 

We recommended that a more appropriate structure for the overseas operations would be the use of limited liability companies as opposed to transparent entities. The significant advantage was the ease of setting up the entities and the ability to obtain regulatory approval. Further, as the principals continued to remain partners of the UK partnership, fiscal advantages were retained for them, particularly as a result of the double taxation treaties with France and Germany. 

Given that the overseas subsidiaries sustained losses for the initial years, we recommended that the companies should become dual resident to enable the losses to be relieved against the profits of the UK subsidiaries of the group. 

We worked with our Nexia colleagues to establish the companies, obtain the regulatory approval, register for VAT, income tax and social security purposes and now undertake the full compliance support required.

European subsidiaries

We are assisting a firm with the restructuring of its European operations across 12 countries. The objective is to simplify the structure so that the UK LLP holds the interests in the European subsidiaries through a Dutch holding company. The project involves the coordination of the accounting and tax advice from each overseas office in order that the restructuring can be affected in a tax efficient manner. This will result in a reduction in overall taxes suffered of 7.34%. 

Our client has asked us to provide an overview of the tax ramifications arising in the various jurisdictions and coordinate the work undertaken by the professional advisers assisting with the project.